Pradhan Mantri Mudra Yojana: Funding the Unfunded


The Mudra scheme developed by Government of India to help women entrepreneurs  ropes in loans, a Mudra Card and so on; and has proved to be a rescue pad for micro and small scale businesses today.

India is a democracy which is predominantly ruled by its rural population. The rural part of the country is not only famous for its rustic beauty, but also is a manifestation of varied artefacts that the rural people assemble. India is known for its diversity in its artistry. Hence Government of India pays special emphasis to the development and growth of this sector. The rural part of the country is also governed by multiple small scale businesses that presents these artefacts to the world and in turn contribute to the economy of the country. These small scale industries are mostly started by women entrepreneurs who are skilled and are strong willed to showcase their dexterity to the world.

However, women of India are subjected to various hindrances when it comes to their economic independence. They struggle with funding; they lack proper support from their families and community; they are not very well versed in marketing strategies and there is no proper training in this sector. It is very important to include the women in the economic growth of the country because they constitute an important and productive part of the population.

Government of India has designed the Mudra scheme to help the women entrepreneurs with the funding issue. The tagline of the scheme says “funding the unfunded” and it clearly serves the tagline as in the year 2018, 1.25 crore new entrepreneurs opened their Mudra account to whom over Rs 93,000 crore were disbursed. Hence, it is very clear from the data that for entrepreneurs funding is a major struggle.

Mudra is a non-banking finance company that funds micro enterprise sector. The main function of Mudra scheme is to develop the non-corporate small businesses and enable them to access formal financial institutions that include public sector banks, private sector banks, regional rural banks, urban cooperative banks, state cooperative banks, micro finance institutions and non banking finance companies.

Men and women who are having a small scale business enterprise, can apply for a mudra loan. This loan is given under three categories. The first category is known as shishu(for extremely small business units) covers loans upto Rs 50,000. The second category known as ‘Kishore’ (slightly bigger units) covers loans above Rs 50,000 and up to 5 lakh. The third category known as ‘Tarun’(relatively bigger units) covers loans above Rs 5 lakhs and upto Rs 10 lakh. It operates a special refinance scheme known as Mahila Uddyami Scheme for women entrepreneurs.

There is also a Mudra card for the beneficiaries that operate very much like a debit card. It is issued against Mudra loan and it accounts for capital portion of the loan. It can be used for withdrawing cash from ATM/micro ATM and this cash functions like a working capital for the loan takers.

This scheme was launched on April 8th 2015 and it’s an initiative of the Modi government for the development of small scale business sector and empowerment of women entrepreneurs. The scheme is specially designed for non-farm enterprises and it also promotes the artistry that rests in the rural part of the country.

Mudra loan has successfully contributed in including more and more women in economy of the country. Women are now breaking out of their shell, and are coming out to start their own enterprises. It has empowered the rural women of the country which is vital for development of the nation. Women are encouraged to start beauty parlours, tuition centres, tailoring units and various other small ventures with the help of Mudra loans.

The government has proposed a budgetary support of Rs 500 crore for the micro, small and medium enterprises via Mudra scheme during the budget of 2019-20. It has sanctioned 15.56 lakh loans amounting Rs 7.23 lakh crore under Mudra scheme.

While this scheme is proving to be a major success for the Modi government, there are some loopholes in the scheme which have raised a flag of concern for the Reserve Bank of india. The scheme disburses small ticket sized loans of less than Rs 10 lakhs and it requires different expertise to manage these loans and making it a success. Hence RBI has created new institutional infrastructure in the form of Small Finance Banks that specialises in managing small ticket size loans.

However, this scheme has proved to be a rescue pad for micro and small scale businesses. There were more than 4.81 crore micro borrowers who have benefitted through Pradhan Mantri Mudra Yojana drunig the year 2017-18. It has helped women entrepreneurs majorly and have successfully involved them in the growth and development of the country’s economy.

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